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March 3, 2004 Economic and Engineering Services Inc. Amendment No. 1 to Agreement for Professional Engineering Services Water Conservation Plan City of Moscow, Idaho Work Order No. 2-03-354 Economic and Engineering Services Inc. ("EES") and the City of Moscow, Idaho ("Client") entered into an Agreement for Professional Engineering Services executed on November 13, 2003 ("Agreement"). This Amendment to the Agreement is entered into by and between EES and Client. Section I of the Agreement (Scope of Work) is hereby amended as follows: • A new task is added to the scope of work: Task 10, Develop Interim Rate Structure. Attachment A (Letter dated February 3, 2004) describes this task in detail. (The attachment identifies Tasks 1 - 4, which will be considered Subtasks of Task 10). Section 11-8 of the Agreement (Fees and Conditions for Engineering Services) is hereby amended as follows: • The not-to-exceed fee for the project is increased by $7,500 to allow for completion of Task 10. With this addition, the total project budget will be $32,500. • Task 10 will be completed within six to eight weeks of execution of this Amendment. This timeline assumes that the City can readily provide the necessary data and project meetings between City staff and EES can be scheduled in an expedited manner. By signing below, EES and Client hereby agree to this Amendment. Economic and Engineering Services Inc. John M. Maxwell Vice President City of Moscow 2004-08 ---PAGE BREAK--- February 3, 2004 Mr. Tom Scallom Water Superintendent City of Moscow 120 West A Street Moscow, ID 83843 Attachment A Subject: Interim Water Utility Rate Structure Dear Mr. Scallom: This proposal is in response to the City's request to implement an interim rate structure for the water utility. The City is currently work ing on a Conservation Plan that will identify incentives, hardware, technical measures and rate structures that will together assist the City accomplish its conservation goals. To begin implementation of an initial conservation effort, the City desires to implement an interim water rate structure prior to the beginning of the 2004 watering season. E conomic and E ngineering Services, Inc. (EES) has developed this letter proposal to identify the time, cost, data requirements and other issues that the City may encounter during the development and implementation of an interim rate structure. Summary of the Scope of Services The scope of services for this project include the following task s. Task 1 -Data Requirements-Billing Units and Customer Count The initial data that would be required to develop an interim rate structure for the City would focus on billing data and customer count. Without the assistance of a comprehensive rate study process to review appropriate classes of service, EES would recommend that the City gather billing data for the existing customer classes. The City's customer classes are defined as; single family, multi-family and commercial. The billing data will need to be gathered for a 12-24 month period. The data would group customer classes and provide a total billed use, by month, for each account in the customer class. An example of the information required is attached. EES has found that an excel spreadsheet with this information is most efficient to allow the analyst greater flexibility with the data. Task IA -Data Requirements-Target Revenue Levels EES will also need to identify the target revenue level for each account and for each month of the billing data provided in Task 1. A listing of the revenues that tie to the billed ---PAGE BREAK--- Mr. Tom Scallom February 3, 2004 Page 2 consumption is imperative to the rate design process. If a per account revenue figure is unavailable, at a minimum a class total would be helpful. The revenue figures requested ensure that the new rate structure developed meets the revenue needs of the utility. Without a formal rate study process, the new rates will be designed to generate the cur ent revenue levels of the utility. Task 2- Development of Rate Design The next step after gathering and manipulating the billing data would be development of the rate structure. Due to the expedited time frame, it is assumed that the current fixed charges would remain in place until a rate study is completed and the immediate effort is to restructure the commodity charge to be more conservation based. The Conservation Plan's initial draft recommendation was for the City to implement a tiered rate or seasonal tiered rate structure. A conference call or meeting to discuss which alternative to implement is warranted. A k ey assumption to a successful rate structure is the assumed level of conservation that will occur. The City staff and EES will need to discuss this assumption level. This assumption is important since the current billed units will have to be ramped down to ensure that the new rate recommendation generates sufficient revenue. One of the final discussions that will need to tak e place with the City and EES is the determination of appropriate rate block s. It is recommended that the City use a maximum of three rate block s. For example, the first rate block should encompass the amount of water that the City believes is sufficient for "indoor" use. The second block would allow for irrigation use but also provide an incentive for landscaping for lower irrigation needs. The third block would be considered inefficient use. EES will use information from the current Conservation Plan, staff expertise on the City's water usage characteristics, industry research and other relevant City documents to det1ne each of these rate block s. It may be lik ely that, for the commercial class, only two usage block s are defined. This area will require significant discussion between the City andEES. Task 3- Bill Comparisons A bill comparison, for each customer class, will be provided that shows a comparison between the present bill and the proposed bill at various levels of usage. Bill comparisons are useful in assessing the potential impacts to a wide variety of customers. Task 4- Technical Memorandum The technical memorandum is intended to document all of the activities undertak en as a part of the project, along with our findings, conclusions and recommendations. EES will provide a draft copy of the memorandum for review and comment. Three copies of the final technical memorandum will be provided to the City. ---PAGE BREAK--- Mr. Tom Scali om February 3, 2004 Page 3 It is important for the City to understand that the interim water rate structure proposed should only be temporary and a formal rate study process should be completed to verify the results as soon as possible. The comprehensive rate study will provide additional rate options to the City g. variable meter charges and different customer classes). In addition, the rate study will provide the documentation and verification that the rate designs developed are cost-based thereby limiting the potential for challenges from the City's customers. An interim rate study is not generally recommended but is possible so long as a comprehensive rate study will be conducted in the near future. Project Personnel Project management and analysis for this study will be provided primarily by the following individuals. The project manager has recently work ed with the City on the Conservation Plan. Provided below is a brief overview of the project team members. Angie Sanchez Virnoche-Angie will serve as project manager and task lead. In this role, she will manage the day-to-day portions of the project and complete all a majority of the technical analysis. Angie's expertise is financial planning, cost of service and rate design. Shawn Koorn-Shawn will provide computer modeling and technical assistance on the project. Shawn recently completed work for the City of Boulder conservation rate structure study and will bring the valuable experience and expertise he learned from that project to assist the City with the interim rate design. Kevin Gardes-Kevin will provide his k nowledge of the local area and City usage characteristics, as needed. Kevin has and continues to have a successful work ing relationship with the City. Estimated Project Timeline EES anticipates that a project of this magnitude may tak e six to eight week s to complete. This timeline assumes that the City can readily provide the necessary data and project meetings between City staff and EES can be scheduled in an expedited manner. EES is committed to work ing with the City to meet its schedule requirements. Estimated Project Fees EES anticipates the services being requested by the City will be in the range of $5 ,500 to $7,500 . EES is willing to enter into a "not to exceed" contract with the City. EES will at all times attempt to complete the work under the not to exceed amount. The range of fees is to allow flexibility for additional issues that may arise during the project that have not been anticipated. ---PAGE BREAK--- l'vlr. Tom Scallom February 3, 2004 Page4 I hope this letter proposal has clearly identified the scope of services that have been requested by the City. Should you have any questions about this letter proposal, please do not hesitate to contact me. Thank you for the opportunity to provide this technical assistance to the City. Sincerely, ECONOMIC Al'ID ENGil'iEERING SERVICES, INC. Angie Sanchez Vimoche Financiruanager ASV:smn